Financial Accounting notes

Financial Accounting Revised and Updated notes

GENERAL OBJECTIVE

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to prepare financial statements for different entities

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

  • Prepare books of original entry and basic ledger accounts under double entry system
  • Prepare basic financial statements of sole traders. partnerships, companies and manufacturing entities and not for profit organisations
  • Comply with the regulatory framework in the accounting field
  • Account for assets and liabilities
  • Analyse financial statements by use of ratios and statement of cash flows

 

CONTENT

  1. Introduction to Accounting

  • The nature and purpose of accounting
  • Objectives of accounting
  • Users of accounting information and their respective needs
  • The accounting equation
  • Reguratory framework of accounting (regulatory bodies such as ICPAK, IFAC, IASB, IPSAB
  • Accounting standards (IAS/IFRS), (Importance and limitations)
  • Professional ethics
  • Accounting concepts/principles
  • Qualities of useful accounting information

2          Recording transactions

  • Source documents (quotations_ purchases order, statement of account. remittance advice, receipts, petty cash vouchers_ sales arid purchase invoices, credit notes and debit notes, bank statements)
  • Books of original entry: sales journal, purchases journal, returns inward, returns outward journal, cashbook, petty cashbook and general journal
  • Double entry and the ledger; general ledger, sales ledger, purchases ledger
  • The trial balance
  • Computerised accounting systems- Role of computers, application and accounting softwares in the accounting process, benefits and challenges of operating computerised accounting systems
  1. Accounting for assets and liabilities

3.1 Assets

  • Property, plant and equipment — recognition, capital and revenue expenditure, measurement (depreciation and revaluation), disposal and disclosures — property, plant and equipment schedule
  • Intangible assets — recognition, measurement (amortisation, impairment and revaluation), disposals and disclosures
  • Financial assets- examples and risks only
  • Inventory – recognition, measurement and valuation using specific. cost method (FIFO and weighted average cost)
  • Trade receivables – bad debts and allowance for doubtful debts and receivables control accounts
  • Accrued income and prepaid expenses
  • Cash at bank — cashbook and bank reconciliation statement
  • Cash in hand – cash book and petty cash book

3.2 Liabilities

  • Bank overdraft – cash book and bank reconciliation
  • Trade payables – payables control accounts
  • Loans – accounting treatment of repayment of principal and interest
  • Prepaid income and accrued expenses
  1. Correction of errors and suspense account

Download Financial Accounting Revised and Updated notes

5. Financial statements of a sole trader

  • Income statement
  • Statement of financial position
  1. Financial statements of a partnership

  • Partnership agreement
  • Introduction to Partnership accounts
  • Distinction between current and fixed capital
  • Income statement
  • Statement of financial position
  • Changes in partnership – Admission of a new partner, retirement and change in profit sharing ratio
  1. Financial statements of a company

  • Types of share capital – ordinary shares and preference shares
  • Issue of shares (exclude issue by instalment and forfeiture)
  • Types of reserves share premium, revaluation reserve, general reserves and retained profits
  • Income tax -Accounting treatment and presentation (exclude computation)
  • Financial statements – Income statement and statement of financial position
  • Published financial statements (describe a complete set of published financial statements but not preparation)
  1. Financial statements of a manufacturing entity

  • Features of a manufacturing entity
  • Classification and apportioning costs between manufacturing and selling and administration
  • Financial statements – manufacturing account, income statement and statement of financial position
  1. Accounts from incomplete records

  • Features
  • Types of incomplete records (Pure single entry, simple single entry, quasi single entry)
  • Ascertaining of profit by capital comparison
  • Preparation of statement of affairs and profit determination
  • Techniques of obtaining complete accounting information
  1. Financial statements of a not-for-profit organisation

  • Distinction between not for profit making organisation and profit making organisation
  • Nature of receipts and payments accounts
  • Accounting treatment of some special items
  • Income and expenditure account
  • Statement of financial position
  1. Analysing financial statements

  • Statement of cash flows (categories of cash, methods of preparing statement of cash flows and the importance)
  • Financial ratios — definition, categories, analysis and interpretation, application and limitations
  1. Introduction to public sector Accounting

  • Features of public sector entities (as compared to private sector)
  • Structure of the public sector (National and county governments: state corporations and other agencies)
  • Regulatory structures and oversight [IPSASB, PSASB (establishment, mandate and functions), Director of Accounting Services, National Treasury, Parliamentary Committees. Accounting Officers at national and county levels]
  • Objectives of public sector financial statements
  • Objectives of IFSAS
  • Accounting techniques in public sector (budgeting, cash, accrual: commitment and fund)

(Preparation of financial statements should be excluded)

  1. Emerging issues and trends

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